Commercial Contractor Business Plan

Executive Summary

Twin Brothers Construction (TBC) plans to become a leading provider of construction and renovation
services in the local area. The company’s overall strategy will be based on a continuing improvement
process of setting objectives, measuring results, and providing feedback to facilitate further growth and
progress.

TBC is a company, with principal offices located in the local area. The company’s management is highly
experienced and qualified: the brothers who will lead the management team have each accumulated
over twenty five years of experience in the construction industry.

Products/Services

Through their years of experience, TBC’s owners have developed sophisticated bidding, scheduling and
materials solutions for some of the most complex construction projects being done today. The company
will use versatile and completely adaptable methods for a variety of building configurations.

Owners, developers, construction managers, general contractors, and sub-contractors are expected to
realize substantial savings in labor and material costs by using the company’s construction methods and
systems. Applications include commercial and residential structures.

The Market

The housing industry has been growing at a fast pace for several years. An all-time record was set in
1998, when 886,000 new-site single family homes were sold. That represented a 10% gain from the
robust total of 804,000 homes sold in 1997. Although there was a slight drop in the number from 2003,
this makes for an excellent opportunity for future expansion of the industry.

Twin Brothers Construction plans to rapidly develop marketing alliances with industry leaders and
pursue new sales of its services to residential and commercial builders. The marketing strategy will focus
on securing city, county, and state and federal government contracts.
TBC plans to use a direct sales force, relationship selling, and sub-contractors to reach its target markets.
These channels are most appropriate because of time to market, reduced capital requirements, and fast
access to established distribution channels.

Financial Considerations

We expect to pass the break-even point in the second half of the first year. Despite initial large outlays
in cash to promote sales, the company’s cash account is expected to remain healthy. The company
expects approximately $772,000 in sales revenue and reasonable net profits by Year 3.

1.1 Mission

Our mission is to be the best partner for our customers, suppliers and employees. To realize our vision,
we will strive for profitable growth, operational excellence, customer satisfaction and strong brand
positioning.

1.2 Objectives

To have up to three construction projects established within the first year.

To have two building renovation projects in progress by the end of the first year.

To locate and purchase our first rental building by the end of the first year.

To achieve at least 7% profit by the second year.

1.3 Keys to Success

We believe our keys to success will be:

Using the most updated materials and equipment to assure quality construction projects for ourselves
and our customers.

Educating the customers and providing valuable advice during the construction planning stages.

Helping to confirm customer’s research about targeting markets and specific sectors.

Overseeing the logistics associated with a project, which can include arranging local transportation,
booking meetings etc.

Assigning the actual work to an experienced and qualified third-party contractors and sub-contractors.

Company Summary
The brothers will invest a total of $90,000 combined ($55,000 and $35,000) in the start-up of the
company. Initial cash requirements will total $50,000. Start-up assets total $55,000.

2.1 Start-up Summary

The following table describes our start-up requirements. One of our biggest start-up expenses involves
the creation of a website. Ongoing maintenance expenses for the website are included in our Profit and
Loss expenses section.

Start-up Funding

Start-up Expenses to Fund $35,000

Start-up Assets to Fund $55,000

Total Funding Required $90,000

Assets

Non-cash Assets from Start-up $25,000

Cash Requirements from Start-up $50,000

Additional Cash Raised $0

Cash Balance on Starting Date $50,000

Total Assets $75,000

Start-up

Requirements

Start-up Expenses

Legal $2,000

Stationery etc. $100

Brochures $500

Consultants $2,000

Insurance $10,000

Rent (Deposit and 1st Month) $3,000

Work Equipment $6,000

Website Development $10,000

Other $1,400

Total Start-up Expenses $35,000

2.2 Company Ownership

The company ownership will be shared by the Chairman and Chief Executive Officer in the following
percentage amounts:

Chairman = 60%

Chief Executive Officer = 40%

Both owners are veterans in the building industry, each with over 25 years experience

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Commercial Contractor Business Plan

Plan Outline

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Plan Outline:

Executive Summary

Company Summary

Products and Services

Market Analysis Summary

Strategy and Implementation Summary

Web Plan Summary

Management Summary

Financial Plan

Appendix

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Construction Business Resources

Twin Brothers Construction

Products and Services

TBC will sell its services to clients in the area of commercial construction and renovation. The company’s
staff will design specialized construction drawings that outline the schedule, work sequence and the
materials needed for building and renovation construction projects. Owners, developers and general
contractors will realize substantial savings in labor and material costs by using TBC’s customized
performance methods. TBC’s methods will offer complete adaptability at cost-effective prices. The
drawings that the company will furnish to the contractor will specify the order of assembly and erection,
including the location of the strongbacks and joists, the location and actual loading of the ties, location
of accessories and advise clients of the maximum allowable rate of concrete placement.

A longer-term service will be commercial building rental management. This will include the purchase of
commercial building sites or existing buildings that need renovation, coordinating the
construction/renovation, then managing the rental of the property. The company will also be looking for
existing property owners whose properties need renovation to update and increase its income potential,
with TBC eventually taking over the management of these properties on behalf of the owner.

To enter the market with minimum overhead costs, TBC plans to utilize in the first year of operation
mainly sub-contractors and independent experts for its building and renovation projects.

Accident prevention will be the cornerstone of TBC’s safety commitment. The company will strive to
eliminate foreseeable hazards which could result in personal injury or illness; at TBC, health and safety
will not be compromised.

Market Analysis Summary

There were about 792,000 construction companies in the United States in 2002: 237,000 were building
construction contractors; 60,000 were heavy and civil engineering construction or highway contractors;
and 496,000 were specialty trade contractors. Most of these establishments tend to be small, the
majority employing fewer than 10 workers. About 4 out of 5 workers are employed by small contractors.

Construction offers more opportunities than most other industries for individuals who want to own and
run their own business. The 1.6 million self-employed and unpaid family workers in 2002 performed
work directly for property owners or acted as contractors on small jobs, such as additions, remodeling,
and maintenance projects. The rate of self-employment varies greatly by individual occupation in the
construction trades.

The local area is booming at this time, with many development projects running both by public and by
private sources. Overall business growth over the past seven years has averaged approximately 9.5%
and is expected to continue for at least the next several years. This constitutes an attractive market for
TBC. The company will be concentrating on office building construction. This is the fastest growing
segment of all the commercial clients requiring our services. The other categories to serve will include
building renovation along with a segment it calls the general category, to serve other potential
commercial clients.

One longer-term field of operation for the company will be the selling of building material and
components to contractors. By slowly establishing itself as a first-rate material provider, the company
expects to broaden and strengthen its stance in the local building industry. Initially it will focus on
purchasing supplies for its own construction and renovation projects, then use those completed projects
as marketing examples to showcase the quality of materials used and the customized approach used to
design and construct them.

The company plans to develop marketing alliances with industry leaders and pursue new sales of its
services to commercial builders. The market strategy is to capitalize on the company’s future alliances
by securing city, county, and state government contracts.

TBC also plans to use a direct sales force, relationship selling, and sub-contractors to reach its markets.
These channels are most appropriate because of time to market, reduced capital requirements, and fast
access to established distribution channels.

4.1 Market Segmentation

The overall Construction Industry was segmented in 2002 as follows (employment in thousands):

Industry

Employment

Percent

Total, all industries

6,731.7

100.0

Construction of Buildings

1,583.8

23.5

Residential building

807.4

12.0
Nonresidential building construction

776.4

11.5

Special trade contractors

4,217.9

62.7

Building equipment contractors

1,842.5

27.4

Foundation, structure, & building exterior contractors

915.4

13.6
Building finishing contractors

879.5

13.1

Other specialty trade contractors

580.5

8.6

Highway, street, and bridge construction

344.4

5.1

Land subdivision

86.1

1.3

Other heavy and civil engineering construction

119.0

1.8

Special trade contractors

4,217.9

62.7

Building equipment contractors

1,842.5

27.4

Foundation, structure, & building exterior contractors

915.4

13.6

Building finishing contractors

879.5

13.1

Other specialty trade contractors

580.5

8.6

Source: U.S. Department of Labor, Bureau of Labor Statistics (March 9, 2004)

For the purpose of this paper we shall segment our initial targeted market as follows:

Office Building Construction

Building Facilities Renovation

General Construction

Market Analysis

Potential Customers Growth CAGR

Office building construction 6% 2,517 4,027 4,268 4,524 4,795 17.48%

Building facilities renovation 3% 2,750 2,833 2,917 3,005 3,095 3.00%

General construction 3% 3,264 3,362 3,462 3,567 3,674 3.00%

Total 7.90% 8,531 10,222 10,647 11,096 11,564 7.90%

4.2 Service Business Analysis

The construction industry is divided into three major segments. Construction of buildings contractors, or
general contractors, who build residential, industrial, commercial, and other buildings. Heavy and civil
engineering construction contractors who build sewers, roads, highways, bridges, tunnels, and other
projects. Specialty trade contractors who are engaged in specialized activities such as carpentry,
painting, plumbing, and electrical work.

Construction usually is done or coordinated by general contractors, who specialize in one type of
construction, such as residential or commercial building. They take full responsibility for the complete
job, except for specified portions of the work that may be omitted from the general contract. Although
general contractors may do a portion of the work with their own crews, they often sub-contract most of
the work to heavy construction or specialty trade contractors.

Specialty trade contractors usually do the work of only one trade, such as painting, carpentry, or
electrical work, or of two or more closely-related trades, such as plumbing and heating. Beyond fitting
their work to that of the other trades, specialty trade contractors have no responsibility for the structure
as a whole. They obtain orders for their work from general contractors, architects, or property owners.
Repair work is almost always done on direct order from owners, occupants, architects, or rental agents.

Twin Brothers Construction will concentrate its activity in the following areas:

Commercial Building Construction

Commercial Building Renovation

Buildings Management and Rental

Building Materials Supplies

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Commercial Contractor Business Plan

Plan Outline
Start your plan

Plan Outline:

Executive Summary

Company Summary

Products and Services

Market Analysis Summary

Strategy and Implementation Summary

Web Plan Summary

Management Summary

Financial Plan

Appendix

Start your plan

Construction Business Resources

Twin Brothers Construction

Strategy and Implementation Summary

TBC plans to use a direct sales force, relationship selling, and sub-contractors to reach its target markets.
These channels are most appropriate because of time to market, reduced capital requirements, and fast
access to established distribution channels. The owners of TBC want to emphasize to their potential
customers that they are more than general contractors, they are complete construction coordinators.

TBC plans to advertise in magazines, newspapers, and radio. Initially a website with information on the
company owners, their construction background, and contact information will be available online.
References to the website will be mentioned in all other forms of advertising. Channels used to reach
market segments include: sales associates, the Internet and direct mail.

In addition, The table and chart below outline the company’s sales forecast for FY2005-2007. In our sales
forecasts, the cost of sales includes only direct labor costs.
5.1 Competitive Edge

The company plans to become a leading provider of construction services in the local area. To achieve
this, TBC will invest in many ways that will pay off in competitive advantages for its customers, for
example:

Pre-job conferencing upon request

Assist in technical or conceptual design

Assist in supervision when other contractors are employed

Organize project supervision facilities and staff

Organize delivery of purchased materials

Furnishing after-market products

5.2 Marketing Strategy

Our marketing strategy is the key to our success:

Emphasize our name and unique services through advertising, including a Web page of contact
information. An amount of $10,000 for the design of the website has been included in the Start-up
expenses with ongoing maintenance costs estimated monthly.

Focus on commercial building and renovation projects as our initial and primary target markets.

Use completed projects to showcase our customized construction project management to prospective
clients.

5.3 Sales Strategy

Sales success requires planning. The company will formulate its sales strategy and tactics to achieve
sales success by following these steps:

Step 1 – Analyzing The Company’s Potential: Step through a structured process to help us develop a
sales strategy.

Step 2 – Strategize Around Strengths: The description of sales activity will be analyzed to produce a
report on factors impacting sales potential and ways to strengthen this potential.
Step 3 – Develop Tactics: Receive guidance to develop a comprehensive tactical plan to achieve success.

Step 4 – Measure Our Past Success: Develop key measurements that mark the progress of financial
estimates that guide our growth.

Final Step – Employ An Action Plan for Success: Provide sales force with a tactical plan that is aligned
with management’s strategic objectives.

5.3.1 Sales Forecast

The company will start its operation in the first year by focusing on two areas:

Direct construction work

Renovation of existing buildings

Starting later in the second year and continuing into the third year the following areas of operation will
be added:

Renting of Industrial Spaces

Sale of components and other building materials and components

The following table details the forecasts.

Sales Forecast

Sales

Direct Construction Projects $135,000 $175,000 $218,750

Building Renovations $123,000 $153,750 $192,188

Building Rentals$0 $75,000 $200,000

Sale of Components and Goods $0 $75,000 $150,000

Other $9,000 $10,000 $12,000

Total Sales $267,000 $488,750 $772,938

Direct Cost of Sales Year 1 Year 2 Year 3

All construction work $54,000 $70,000 $87,500

Renovations $49,200 $61,500 $76,875

Rentals $0 $15,000 $40,000

Sale of Components and Goods $0 $30,000 $60,000

Other $9,000 $1,000 $1,200

Subtotal Direct Cost of Sales $112,200 $177,500 $265,575

Management Summary

The company’s management philosophy will be based on responsibility and mutual respect. Twin
Brothers Construction will maintain an environment and structure that will encourage productivity and
respect for customers and fellow employees.

TBC will be responsible to its employees and sub-contractors, the men and women who will work with
the company throughout the state. At TBC everyone will be considered as an individual and the
company will respect their dignity and recognize their merit. Employees will be encouraged to have a
sense of security and pride in their jobs. Additionally, employees will be free to make suggestions and
complaints. The company will afford equal opportunity for employment, development, and
advancement for those qualified.

TBC employees will be committed to:

Providing a safe work environment to protect employees, the employees of customers and sub-
contractors, and the public.

Supplying safe products for customers.

Continuously improving the company’s safety program to reduce the risk of accidents and occupational
illness in a changing work environment.
Encouraging employees to participate in accident prevention programs and take personal responsibility
for their own and their co-workers’ health and safety.

Regulatory compliance and contribution to high safety standards for our industry.

Monitoring workplaces, enforcing safe work practices, and communicating the company’s safety
performance to employees and other stakeholders.

Making safety a value-added service that the company provides to its customers.

The company is planning to expand its personnel to add more job superintendents as soon as the
number of projects increases. These superintendents will have the following duties:

Direct supervision of all work at the job sites:

Quality Control

Scheduling sub-contractors and material deliveries

Verifying and insuring that all work is done in accordance with plans

Insuring that all work is performed in accordance with all OSHA guidelines

7.1 Personnel Plan

The personnel plan is based on the two owners to guide and oversee the operations that will be
managed by themselves. Having been in business for over 25 years, they have agreed to draw very low
salaries for the first two years to offset some of the initial expenses in starting the business.

For the first year, the company will hire temporary and part-time employees and sub-contract with
consultants and construction professionals to perform the variety of tasks needed. Also, our contracted
construction personnel expenses are reflected in our Sales Forecast as cost of sales, not part of our
personnel table, since they will not be regular employees of the business.

Personnel Plan

Chairman (Principal Owner) $18,000 $25,000 $60,000

CEO (Secondary Owner) $18,000 $25,000 $60,000

Office Clerk (Temporary Hire) $17,250 $32,000 $32,000

Foreman (Temporary Hire) $21,600 $42,000 $42,000

Technical Employee (Part-time) $9,000 $25,000 $25,000

Total People 5 7 8

Total Payroll $83,850 $149,000 $219,000

7.2 Safety

TBC will be committed to conducting business in a manner that protects the health and safety of all
employees, customers, and persons living in the community where it operates. To accomplish this, the
company will ensure that it complies with current Health Administration and Occupational Health and
Safety laws and will maintain its operations, procedures, technologies, and policies accordingly.

Each employee will have the responsibility to fully comply with established safety rules and to perform
work in such a manner as to prevent injuries to themselves and others. TBC will be very concerned
about job-site safety and plans to set up a comprehensive safety program.

Financial Plan

The brothers have long-term experience in the local construction industry. They are willing to invest
heavily in this new company and their accumulated experience will insure success for the new venture.
It will be important to watch closely the salaries and regular expenses to assure that the company will
not suffer from lack of sufficient cash to fund its operations.

We assume a conservative entrance and steady growth in the market.

We assume a slow financial progress based on initially conservative sales against highest expenses.

We assume there will not be an economic crash that would greatly hinder our target market’s access to
their personal luxury finds.

The following sections describe the financials for TBC:

8.1 Projected Profit and Loss

Twin Brothers Construction is in the early stage of development, thus initial projections have only been
made based on the sales projections and efficient cost control measures in place. Our first year monthly
net profits will become positive by October, but we will still close the year with negative profit. This is
primarily because of personnel expenses, which include salaries and the cost of sales for sub-
contractors.
Pro Forma Profit and Loss

Sales $267,000 $488,750 $772,938

Direct Cost of Sales $112,200 $177,500 $265,575

Other $0 $0 $0

Total Cost of Sales $112,200 $177,500 $265,575

Gross Margin $154,800 $311,250 $507,363

Gross Margin % 57.98% 63.68% 65.64%

Expenses

Payroll $83,850 $149,000 $219,000

Sales and Marketing and Other Expenses $7,500 $10,000 $0

Depreciation $0 $0 $0

Gasoline and oil$3,600 $3,750 $4,800

Telephone $1,500 $2,400 $3,500

Utilities $4,800 $11,250 $10,282

Insurance $9,000 $8,226 $24,000

Rent $7,478 $20,000 $25,000

Payroll Taxes $6,522 $0 $0

Website Maintenance & Support $4,200 $6,000 $9,375

Consultants $6,000 $7,500 $9,000

Advertising $6,000 $1,980 $3,500

Misc. Other Expenses $1,800 $2,500

Appendix

Sales Forecast

Sales
Direct Construction Projects 0% $0 $0 $0 $10,000 $10,000
$10,000 $15,000 $15,000 $15,000 $20,000 $20,000
$20,000

Building Renovations 0% $7,500 $7,500 $8,000 $8,000 $9,000 $9,000 $10,000

$10,000 $12,000 $12,000 $15,000 $15,000

Building Rentals0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
$0 $0

Sale of Components and Goods 0% $0 $0 $0 $0 $0 $0 $0 $0

$0 $0 $0 $0

Other 0% $0 $0 $0 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000

$1,000

Total Sales $7,500 $7,500 $8,000 $19,000 $20,000 $20,000

$26,000 $26,000 $28,000 $33,000 $36,000 $36,000

Direct Cost of Sales Month 1 Month 2 Month 3 Month 4 Month

5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11
Month 12

All construction work 40% $0 $0 $0 $4,000 $4,000 $4,000 $6,000 $6,000 $6,000
$8,000 $8,000 $8,000

Renovations 40% $3,000 $3,000 $3,200 $3,200 $3,600 $3,600 $4,000 $4,000 $4,800 $4,800
$6,000 $6,000

Rentals 20% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
$0

Sale of Components and Goods 20% $0 $0 $0 $0 $0 $0 $0 $0

$0 $0 $0 $0

Other 10% $0 $0 $0 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
$1,000

Subtotal Direct Cost of Sales $3,000 $3,000 $3,200 $8,200 $8,600 $8,600 $11,000
$11,000 $11,800 $13,800 $15,000 $15,000

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Personnel Plan
Chairman (Principal Owner) 0% $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500
$1,500 $1,500 $1,500 $1,500

CEO (Secondary Owner) 0% $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500
$1,500 $1,500 $1,500

Office Clerk (Temporary Hire) 0% $1,250 $1,250 $1,250 $1,250 $1,250 $1,250 $1,500 $1,500
$1,500 $1,750 $1,750 $1,750

Foreman (Temporary Hire) 0% $0 $0 $0 $2,400 $2,400 $2,400 $2,400 $2,400

$2,400 $2,400 $2,400 $2,400

Technical Employee (Part-time) 0% $0 $0 $0 $0 $0 $0 $1,500 $1,500

$1,500 $1,500 $1,500 $1,500

Total People 3 3 3 4 4 4 5 5 5 5
5 5

Total Payroll $4,250 $4,250 $4,250 $6,650 $

Plumbing Business Plan

Water Tubes Plumbing

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Plumbing Business Plan

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Plan Outline:

Executive Summary

Company Summary

Services

Market Analysis Summary

Strategy and Implementation Summary

Management Summary

Financial Plan

Appendix

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Construction Business Resources

Water Tubes Plumbing

Company Summary

Water Tubes Plumbing, soon to be located in Dire Dawa City, OR, will offer plumbing services
for residential new houses as well as custom new houses. Water Tubes will have four
employees by the end of the year.

2.1 Start-up Summary

Water Tubes will require the following equipment and materials:

Two trucks (used) fitted with a pipe rack on top.

Assorted pipes (different diameters and materials).

Assorted fittings.

A 30 gallon bucket to store fittings.

Pipe wrenches.

Reciprocating saw.

Circular saw.

Whole hog (high torque right angle drill).

Cordless screw gun.

Propane torch.
Cast iron pipe cutter.

Extension cords.

Pipe dope (Teflon tape in paste form).

Computer with CD-RW, printer, Microsoft Office, QuickBooks Pro.

Desk, chair, and filling cabinet, and assorted stationary.

Mobile phone.

Please note that the items which are considered assets to be used for more than a year will
be labeled long-term assets and approved straight-line depreciation method.

Start-up

Requirements

Start-up Expenses

Legal $200

Stationery etc. $150

Brochures $0

Consultants $0

Insurance $0

Rent $0
Research and Development $0

Expensed Equipment $0

Other $0

Total Start-up Expenses $350

Start-up Assets

Cash Required$19,650

Other Current Assets $0

Long-term Assets $24,000

Total Assets $43,650

Total Requirements $44,000

Start-up Funding

Start-up Expenses to Fund $350

Start-up Assets to Fund $43,650

Total Funding Required $44,000

Assets

Non-cash Assets from Start-up $24,000

Cash Requirements from Start-up $19,650

Additional Cash Raised $0

Cash Balance on Starting Date $19,650

Total Assets

Liabilities and Capital

Liabilities

Current Borrowing $0

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $0

Other Current Liabilities (interest-free) $0

Total Liabilities $0

Capital

2.2 Company Ownership

Water Tubes Plumbing is a sole proprietorship owned by Amanuel. B

Services
Water Tubes offers the finest in residential home plumbing construction as well as custom
new home construction. Residential construction is chosen because it is straight forward and
clean. Estimates are far more accurate and the company is dealing with a few contractors
instead of many home owners. Additionally, there is no need to be on call 24 hours a day, a
major downside of being a traditional plumber.

New construction will be typically bid at $1 per foot plus a multiple of $400 per fixture.
Fixtures include sinks, toilets, tubs, etc.

The two other elements of Water Tubes services are professionalism and trim quality.
Professionalism of Water Tubes is clearly a service offering that will be highlighted as well as
trim quality which is the part of plumbing that is visible to the customer.

Market Analysis Summary

Water Tubes will be focusing on a specific niche in the plumbing market, new homes. The
company will target both volume builders of new homes as well as customer builders.

Through a combination of networking activities and advertisements, Water Tubes will

increase their visibility among home builders allowing them to gain market share.

4.1 Market Segmentation

Water Tubes will target two distinct segments in the plumbing market:

Volume residential home builders. These builders are creating many different homes, often at
the same time, often on the same plot of land. These builders are in need of a professional,
well priced, reliable plumber for all of their residential new builds. This is an attractive
market niche because the plumbing jobs are clean, numerous, and reasonably easy to do.
Once a builder has found a plumbing company that they are happy with, a long-term
relationship is often established, ensuring a constant flow of future jobs.

Custom home builders. These builders are in need of a plumbing company for their custom
projects. This segment is attractive because the margins are better than typical build jobs and
the projects can be fun to do because it requires creativity and thoughtfulness to accomplish
the task within the established designed constraints. This target market makes up a smaller
percentage of Water Tubes forecasted sales

4.2 Target Market Segment Strategy

The plumbing market (excluding direct to the consumer jobs) is a highly networked industry
where everyone knows everyone and jobs are won or loss by who you know. With this in
mind, Don will work hard to establish himself as an experienced, professional plumber who is
concentrating on the residential new builds market. This will be done in part through
networking with all home builders. The networking will be an important method to increase
visibility of Water Tubes because most home builders are always looking for professional,
high-quality plumbers. It is advantageous for Water Tubes to position themselves as solely
working with the residental new build market because it is attractive to builders to form a
relationship with a plumber that is specializing on the new build market and not trying to do
a little of everything. Water Tubes will be marketing themselves with an advertising campaign
in the local home builders journal.

4.3 Service Business Analysis

The plumbing industry is state regulated. The state regulates the industry through a licensing
process based upon the Universal Building Code. The code is state specific and is a
comprehensive code for all building issues. There are three skill levels of plumbers. The first
is the apprentice who is basically a skilled laborer. In Eugene, apprentices earn from $8-$12
an hour depending on experience level. The next level is a journeymen. To achieve the
journeymen license you must past the state journeymen test. Journeymen in Eugene
typically earn from approximately $18 an hour. The last step in the plumbing hierarchy is a
master plumber. A master plumber is a journeymen with more than 10 years experience and
their earning potential is from $35-$50 per hour.

In order to do work in the state, it is required that a deposit is made into the workers
compensation fund of $4,000 during the first year. This is only for new companies that have
no record of revenue, and no record of worker compensation history. After one year of no
claims, $1,000 is refunded per year and after five years the entire amount is refunded. In
essence, this is acting as a bond for newly formed companies.

The timetable for work in this niche is as follows:

Two people, one full day, rough-in (plumbing in the floors and concrete).

Two people, one full day, top-out (plumbing in the walls).

One person, one full day trim (sections visible to the end-user).
Please note that within the industry ratios’ the gross margin for the industry is significantly
lower than what is forecasted for Water Tubes. The variance can be explained by the fact
that the industry ratios are for repair plumbing as well as new construction. The repair work
is more parts intensive and has skewed the gross margin ratio.

4.3.1 Competition and Buying Patterns

The plumbing market is quite competitive, and consequently in order to reap decent profits,
large quantity of work must be done. Competitors can be broken down into three groups:

Chains: these plumbing companies are a franchise or a division of a larger chain. The chains
typically do repair work instead of new building construction, but sometimes they do work
with new builds.

Private companies: these companies are typically local. In order to generate sufficient
revenue, they will offer a wide range of services.

Large commercial & residential companies: these are the local Starbucks of the plumbing
world and will bid on any type of plumbing project, whether commercial or residential, repair
or new builds. The majority of jobs that this competitor will work on is the larger commercial
projects, but a getting a contract with a volume home builder would be attractive.

The buying habits of the target segments is based primarily on networking. Once a
relationship is established, the builder will typically give the plumber one to two jobs to
display their work before any type of long-term contract/relationship is developed.

Strategy and Implementation Summary

Water Tubes will first increase visibility through networking activities. Don will leverage his
years as a local plumber working for a larger company. Once Water Tubes has developed
visibility, they will highlight their competitive advantages of professionalism and trim quality
with a test project for the builder. Generally, Water Tubes will be able to win over contracts
after their initial display of workmanship.

5.1 Competitive Edge

Water Tubes has two competitive advantages that they will leverage to gain market share:

Professionalism. Fortunately for Water Tubes, professionalism seems to be absent among

many plumbers skill sets. Water Tubes will exhibit their professionalism in all aspects of
customer interaction as well as job performance. It is very common for plumbers to bid out
for more items that they can handle at once. This is done because the assumption is that
they will not get all the jobs they bid for so it is likely that their job load will be balanced out
in the long run. Some times this works, other times it fails. This is a common source of
unprofessionalism that will not happen at Water Tubes. Additionally, all employees will be
indoctrinated into this customer-centric culture, ensuring that all interactions with anyone
from Water Tubes will be a positive experience.

Trim Quality. This is the part of the job that is visible to the customer as opposed to the bulk
of the work that is hidden behind cabinets and walls. There are not a lot of plumbing
companies that have consistently good trim quality. This is one way that Water Tubes can
easily stand out relative to the competitors. Having high trim quality is also an easy way to
impress home builders since they will have to fix any issues that are unsatisfying to home-
buyers, so sloppy trim work will usually have to be remedied at some point, usually when it is
inconvenient

5.2 Marketing Strategy

As mentioned earlier in the Target Market Segment Strategy, Water Tubes marketing
campaign will be based on both networking as well as advertising.

Networking. This will consist of meeting with builders that Don had worked with in the past,
as well as others in the industry. Don will chat with them and let them know about his
current venture and request a trial build to prove himself. Because the industry is so closely
networked, whenever he runs into someone he will mention his new company. This will
spread the word rather fast as contractors tend to bump into each other all over town, both
socially as well as professionally.

Advertising. Don will be running advertisements in the local home builders journal. This
publication is a printed resource that home builders will typically consult when they are in
need of a contractor for a specific service in the construction of their house. Because the
readership is targeted and so closely interconnected, advertisements will be quite effective.
Don will also put an advertisement in the Yellow Pages, however Don believes that the
advertisements in the trade journal will be more effective due to the closer demographics
and behavior factors of the readership group.

5.3 Sales Strategy

Water Tubes sales strategy will be to get at least one job with the new builder to provide
them with an example of Water Tubes work. Based on the current competition, a display of
Water Tubes competitive edges of professionalism and trim quality will likely be more than
sufficient to turn a prospective customer into a long-term relationship.

5.3.1 Sales Forecast

The first month will be used to set up the business. The second month will be used to train
an employee as well as to undertake several jobs. The third month will be used to train two
more employees as well as do a few other jobs. By the fourth month it is forecasted that
Water Tubes will have a volume relationship with one builder. Month four will also see a
custom home built. Month six will mark the development of another volume builder. From
month six on there should be a steady increase in sales activity.

Sales Forecast

Sales

Non-custom homes $104,858 $151,987 $165,454

Custom homes $29,000 $38,765 $49,876

Total Sales $133,858 $190,752 $215,330

Direct Cost of Sales Year 1 Year 2 Year 3

Non-custom homes $10,486 $15,199 $16,545

Custom homes $2,900 $3,877 $4,988

Subtotal Direct Cost of Sales $13,386 $19,075 $21,533

5.4 Milestones

Water Tubes will have several milestones:

Business plan completion.

Office set-up.

Training of all employees.

The establishment of the second volume home builder.

Profitability.

Milestones

Milestone Start Date End Date BudgetManager Department

Business plan completion 1/1/2001 2/1/2001 $0 ABC Marketing

Office set-up 1/1/2001 2/1/2001 $0 ABC Department

Training of all employees 1/1/2001 4/1/2001 $0 ABC Department

The establishment of the second volume home builder 1/1/2001 7/1/2001 $0

ABC Department

Profitability 1/1/2001 9/1/2001 $0 ABC Department

Totals $0

Management Summary
Don Roto received his Bachelor of Arts from the University of Portland. After college, Dan
decided to learn more about plumbing, one of the odd jobs that he did in college. After six
months of inconsistent work Don landed a job with a larger plumbing company that did both
residential and commercial work. Don started as an apprentice, but within four months had
passed his journeymen exam. Don continued to work for this company for ten years,
receiving his master plumbing designation right at the ten year mark. At this point Don
decided that he wanted to try operating his own company, leveraging skills learned in college
as well as providing him the flexibility of being his own boss. It was at this point that he
started writing the business plan for Water Tubes and eventually quit his job.
6.1 Personnel Plan

Don will be the only employee for the first month. Don will bring on board a second
employee during month two, and two more employees on the third month. It is forecasted
that Water Tubes will stay at four employees for the foreseeable future.

Personnel Plan

Don $36,000 $40,000 $50,000

Journeymen employee $28,800 $34,560 $34,560

Apprentice employee$17,600 $19,200 $19,200

Apprentice employee$16,000 $19,200 $19,200

Total People 4 4 4

Total Payroll $98,400 $112,960 $122,960

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Plumbing Business Plan

Plan Outline

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Plan Outline:

Executive Summary

Company Summary

Services

Market Analysis Summary

Strategy and Implementation Summary

Management Summary

Financial Plan

Appendix

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Construction Business Resources

Water Tubes Plumbing

Financial Plan

The following sections will outline important financial information.

7.1 Important Assumptions

The following table details important financial assumptions.

General Assumptions

Plan Month 1 2 3

Current Interest Rate 10.00% 10.00% 10.00%

Long-term Interest Rate 10.00% 10.00% 10.00%

Tax Rate 30.00% 30.00% 30.0

Pro Forma Profit and Loss

Sales $133,858 $190,752 $215,330

Direct Cost of Sales $13,386 $19,075 $21,533

Other Production Expenses $0 $0 $0

Total Cost of Sales $13,386 $19,075 $21,533

Gross Margin $120,472 $171,677 $193,797

Gross Margin % 90.00% 90.00% 90.00%

Expenses

Payroll $98,400 $112,960 $122,960

Sales and Marketing and Other Expenses $1,800 $1,800 $1,800

Depreciation $3,456 $3,456 $3,456

Insurance/ License/ Bonds $6,000 $5,000 $4,000

Rent $0 $0 $0

Payroll Taxes $14,760 $16,944 $18,444

Other $0 $0 $0

Total Operating Expenses $124,416 $140,160 $150,660

Profit Before Interest and Taxes ($3,944) $31,517 $43,137

EBITDA ($488) $34,973 $46,593

Interest Expense $0 $0 $0

Taxes Incurred $0 $9,455 $12,941

Net Profit ($3,944) $22,062 $30,196

Net Profit/Sales -2.95% 11.57%

Pro Forma Cash Flow

Cash Received

Cash from Operations

Cash Sales $133,858 $190,752 $215,330

Subtotal Cash from Operations $133,858 $190,752 $215,330

Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0

New Current Borrowing $0 $0 $0

New Other Liabilities (interest-free) $0 $0 $0

New Long-term Liabilities $0 $0 $0

Sales of Other Current Assets $0 $0 $0

Sales of Long-term Assets $0 $0 $0

New Investment Received $0 $0 $0

Subtotal Cash Received $133,858 $190,752 $215,330